Crescent Capital-backed National Dental Care’s bid to acquire Pacific Smiles Group (ASX: PSQ) has become more difficult with rival private equity firm Genesis Capital confirming it will vote its 19.9% stake in Pacific Smiles against Crescent’s scheme of arrangement proposal.
Genesis Capital emailed Pacific Smiles Group chair Zita Peach on 14 July confirming it would vote against the proposal “as presently formulated” when it is put to a shareholder vote on 1 August.
Genesis said acquisition of its stake in Pacific Smiles had “been informed in part by its belief that its business model creates superior environments for dental practitioners and experiences for patients”.
Genesis said it recognised that some shareholders, including current or former dental practitioners, might wish to retain stakes in Pacific Smiles but they will not be able to do so if National Dental Care’s current proposal is implemented.
Pacific Smiles acknowledged the Genesis email in a 15 July ASX announcement.
In the announcement, the company said an independent expert had concluded that its $303 million $1.90-cash-per-share offer was fair and reasonable and therefore in the best interests of shareholders.
Also, Pacific Smiles directors continued to recommend shareholders to vote in favour of the National Dental Care offer, conditional only to no superior offer emerging and the independent expert maintaining approval of the offer.
Pacific Smiles noted that Genesis Capital had not submitted a further offer since its $279 million $1.75-per-share revised non-binding offer on 19 March.
National Dental Care’s scheme of arrangement offer will need to be accepted by a minimum of 75% of votes cast and 50% of shareholders taking part in the vote.
Pacific Smiles said: “The scheme can still be passed by the requisite majorities of Pacific Smiles shareholders if substantially all the remaining Pacific Smiles shareholders vote in favour of the scheme. Your vote is important in determining whether the scheme proceeds and the Pacific Smiles directors strongly encourage you to vote.”
The Takeovers Panel recently declined a request from Crescent for it to make orders against Genesis over its conduct in connection with its acquisition of its stake in Pacific Smiles.
The panel’s 5 July decision followed it earlier making a declaration of unacceptable circumstances in regard to Genesis’ conduct. This involved Genesis’ level of disclosure on how it converted from having an economic interest in 19.90% of Pacific Smiles through a cash-settled total return swap arrangement in December to becoming the physical owner of the stake on 7 May.
The panel said the market had not been fully informed at all times and declared this unacceptable. However, it concluded it was unable to make orders to remedy the situation that would not unfairly prejudice any person.
The tussle to acquire Pacific Smiles involves former colleagues. The founders of healthcare specialist firm Genesis, Dr Michael Caristo and Chris Yoo, were formerly healthcare sector investors with Crescent. Crescent’s healthcare sector team is led by the firm’s founder Michael Alscher and partner Daren McKennay, who has more than two decades of commercial experience in healthcare.
Pacific Smiles operates more than 120 Pacific Smiles and NIB dental centres in East Coast states and manages the operation of HBF Dental Centres in Western Australia.
National Dental Care operates an Australia-wide network of 88 practices.
Genesis established Impression Dental Group in 2021. The group currently operates eight dental centres and a dental laboratory.
Image: Dental surgeries business Pacific Smiles is the subject of a tussle for control between two private equity firms.